Maynilad wins arbitration case; gov’t asked to pay P3.4B

The government has been ordered to reimburse Maynilad Water Service Inc. about P3.4 billion in indemnity for the long delay in regulator’s approval of the utility’s rate increases.

In a statement, Maynilad said the three-member arbitral tribunal of the International Chamber of Commerce (ICC) issued a decision dated July 24 “unanimously [upholding] the validity of Maynilad’s claim [for compensation] for the delayed implementation of its relevant tariffs for the rebasing period 2013 to 2017.”

The water service provider said the tribunal ordered the government through the Department of Finance to reimburse Maynilad the amount of P3.42 billion for losses from March 11, 2015, to Aug. 31, 2016.

The concessionaires of Metropolitan Waterworks and Sewerage System (MWSS) go through five-year rate rebasing periods as stipulated in their 25-year contracts.

In early 2013, Maynilad submitted to the MWSS Regulatory Office a five-year business plan—covering the period from 2013 to 2017—that required an increase in the company’s basic charges by P8.58 per cubic meter.

In September that year, the MWSS-RO issued a resolution ordering Maynilad to cut rates by P1.46 per cubic meters for the five years until 2017 or 49 centavos a year. This prompted the company to seek arbitration as provided for in the concession agreement with MWSS.

In March 2015, Maynilad sent a letter to the DOF seeking P3.44 billion in compensation for 26 months worth of tariff increases that it could not collect from its customers due to regulator’s inaction.

According to Maynilad, the amount represented revenue losses caused by the “refusal of MWSS to honor an arbitral decision ordering rate adjustments that should have started in Jan. 1, 2013.”

On Dec. 29, 2015, an appeals panel presided over by the ICC awarded Maynilad an average increase of P3.06 per cubic meter—on top of the current basic rate of P31.28 per cubic meter—for the five-year rebasing period.

When asked yesterday about the tribunal’s decision, Finance Secretrary Carlos G. Dominguez III told reporters that the government would still look for funds to satisfy the decision of an international arbitration panel and still had to take account of its resources.

“[We] will check if there is budget space for this [compensation for Maynilad],” Dominguez said in a text message.

Ramoncito S. Fernandez, Maynilad president and chief executive, said the company would coordinate and cooperate with the government “in finding the most efficient way to implement the judgment.”

Maynilad added that such reimbursement was “without prejudice to any rights that Maynilad may have to seek recourse against MWSS for losses incurred from Jan. 1, 2013, to March 10, 2015.”

“Further, the tribunal ruled that Maynilad is entitled to recover from the [government] its losses from Sept. 1, 2016, onwards,” the company said.

In case a disagreement on the amount of such losses arises, Maynilad may revert to the tribunal for further determination, the company added.